Inside Look - Allen Stanford Indicted - Bloomberg — Transcript

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1. 0:00all right welcome back to Bloomberg News
2. 0:01on this Friday afternoon I'm Matt Miller
3. 0:03I want to quickly wrap up the top
4. 0:06headlines for you that we've got on our
5. 0:07top story
6. 0:08Alan Stanford has been indicted on what
7. 0:10the Department of Justice is calling a 7
8. 0:12billion dollar fraud along with at least
9. 0:15three co-workers and a foreign official
10. 0:18the government saying in a press
11. 0:20conference just moments ago that he lent
12. 0:22himself 1.6 billion dollars he inflated
13. 0:25the value of assets from one one in the
14. 0:28quarter billion dollars in 2001 to eight
15. 0:29and a half at the end of last year and
16. 0:31that in at least one real estate
17. 0:33transaction he inflated the value of
18. 0:35assets by 6 from 63 million dollars to
19. 0:38two billion dollars in what they call a
20. 0:41round-trip real-estate transaction so I
21. 0:43have Alan Bravin here with me on set to
22. 0:44talk more about the indictment it's
23. 0:46actually a broad what's Madoff we only
24. 0:50got one count at the at the first on the
25. 0:53first indictment so these were several
26. 0:54it's six people as well and I know one
27. 0:56thing that you and I were focused on and
28. 0:57talking about with our prior guests as
29. 0:58well is one of the people being named is
30. 1:00Laroy King he was a regulator in Antigua
31. 1:04and it says in this indictment that he
32. 1:06took bribes that the SEC had turned to
33. 1:09him looking for information that it got
34. 1:11Shannon audits and it got phony
35. 1:13statements so as well it's not just
36. 1:16folks who work for the company they're
37. 1:17saying but as well kind of was a
38. 1:18systemic problem or a problem with a
39. 1:20regulator in Antigua I and a couple of
40. 1:22accountants in Antigua as well a couple
41. 1:24of accountants for the company who had
42. 1:26been charged with fraud Marc Kurt and
43. 1:27Gilbert Lopez they're scheduled to be
44. 1:29appearing in court as well one of the
45. 1:31names that we've been talking about in
46. 1:33the name today of someone who was
47. 1:34scheduled to appear in court next week
48. 1:36the government officials are saying is
49. 1:38Laura Pendergast halt she is the chief
50. 1:42investment officer for the company let's
51. 1:44remind folks there are two cases here
52. 1:45that we've been talking about there's
53. 1:47the Department of Justice criminal case
54. 1:49there's a Security and Exchange
55. 1:51Commission civil case the SEC filed its
56. 1:54suit back in February Laura Pendergast
57. 1:56Holt for example that chief investment
58. 1:58officer she was one of the people named
59. 2:00in that suit and there it was an
60. 2:02obstruction charge it was not a criminal
61. 2:04charge so today now being folded in to
62. 2:06the criminal charge and also just remind
63. 2:09folks today the reason the SEC was here
64. 2:11as well not just because of their prior
65. 2:12case
66. 2:13but also adding some folks to their suit
67. 2:15today as well all right so a lot of
68. 2:17charges though coming from the
69. 2:18Department of Justice and these are the
70. 2:20ones that result that could result in
71. 2:22jail time obviously seven charges of
72. 2:24wire fraud I believe ten charges of mail
73. 2:27fraud and then a number of different
74. 2:29conspiracy charges for Allen Stanford
75. 2:32and then also one thing you read a
76. 2:33little while ago as we got the statement
77. 2:35important to keep in mind
78. 2:36Stanford's lawyer so what you had picked
79. 2:37out the key part there that you wanted
80. 2:38well I
81. 2:39we Ellen had gotten a hold of a letter
82. 2:41from the lawyer and he is obviously
83. 2:43continuing to proclaim his innocence the
84. 2:45lawyer says since at least February of
85. 2:48this year
86. 2:48Allen Stanford has been working with
87. 2:50lawyers to meet and challenge the false
88. 2:52accusations against him those
89. 2:54accusations being that the Stanford
90. 2:56companies were fraudulent and
91. 2:57constituted a Ponzi scheme to the
92. 2:59contrary the present insolvency of the
93. 3:01Stanford companies was caused by the SEC
94. 3:04heavy-handed actions which had destroyed
95. 3:06and continue to destroy much of the
96. 3:07value of the Stanford companies and
97. 3:09consequently the interests of investors
98. 3:10so they are not only proclaiming their
99. 3:12innocence but saying that the SEC is the
100. 3:14reason that they have collapsed in the
101. 3:17fund because originally what Stanford
102. 3:18had been claiming was that they had
103. 3:20eight billion dollars and one thing
104. 3:21that's being said in the indictment
105. 3:22today one thing also you and I have been
106. 3:24focusing on is not just that inflated
107. 3:26value of real estate and what they're
108. 3:27calling that round trip transaction as
109. 3:29well in terms of inflating the value of
110. 3:30what they had but also loans to allen
111. 3:33Stanford himself
112. 3:34we know he's someone who lived large
113. 3:36with his yacht sponsoring cricket he had
114. 3:38been knighted by the country in Antigua
115. 3:41so what they're saying in the indictment
116. 3:42which I just opened up here is it was
117. 3:45not disclosed in the report they're
118. 3:46talking about financial reports here
119. 3:47that approximately 4.8 billion dollars
120. 3:50of the purported eight billion value of
121. 3:52total assets was in notes on additional
122. 3:55loans to Stanford and interest in the
123. 3:57certain island property is the value
124. 3:59they say of which had been grossly
125. 4:00overstated in terms of the SEC in terms
126. 4:03of what you're talking about kind of
127. 4:04leading to the collapse and the idea
128. 4:06there they're saying is that he had this
129. 4:09business he had these CDs that were held
130. 4:11for investors and then when the SEC came
131. 4:13out all of that collapsed all right
132. 4:15listen let's go and talk to a legal
133. 4:17expert on this for reaction Peter Cook
134. 4:20from Washington is joined by Jacob
135. 4:22Frenkel he is a partner at the law firm
136. 4:23Shulman Rogers and a former SEC
137. 4:25enforcement attorney Peter taken
138. 4:27why Matt Alan thanks very much Jacob
139. 4:30Frenkel has been with us through the
140. 4:31course of the day talking about this
141. 4:32case when we first heard of Alan
142. 4:35Stanford's arrest in Virginia
143. 4:37Jacob you and I were able to do a little
144. 4:39guesswork earlier today about what might
145. 4:41be in this indictment now the substance
146. 4:43of it are these fraud charges based on
147. 4:45the investments this eight billion
148. 4:47dollars in CDs alleged by by Alan
149. 4:51Stanford
150. 4:52tell me what you make what you've heard
151. 4:53of the indictment and the charges
152. 4:55against him well the answer is yes and
153. 4:57more and to the extent that the
154. 5:00indictment is highlighting the fraud
155. 5:02charges we knew that was coming because
156. 5:04those were set forth in the SE C's case
157. 5:07the civil case that was filed against
158. 5:09Stanford and others we're now saying who
159. 5:11else the government believes is
160. 5:13criminally culpable well I find
161. 5:15particularly interesting is the conduct
162. 5:17of the former Antiguan government
163. 5:20official who has been charged with
164. 5:21bribery that's the exact type of conduct
165. 5:25that that anti-bribery laws have been
166. 5:29created to prevent hold that thought
167. 5:31Jacob we're back with Jacob Frenkel
168. 5:32after this break and we're back here in
169. 5:37Washington with Jacob Frenkel he's a
170. 5:39former SEC enforcement attorneys now
171. 5:41partner at Shulman Rodgers here in the
172. 5:43DC area and we're talking about Allan
173. 5:46stam for the government charging Alan
174. 5:47Stanford you've now had a chance to
175. 5:49review some of the indictment again
176. 5:51complete your thought about your take on
177. 5:52what's happening in this case well the
178. 5:54interesting piece that we were just
179. 5:55discussing was the issue of bribing a
180. 5:57foreign official it's basically charged
181. 5:59in the indictment as obstruction of the
182. 6:02SEC investigation and in essence what
183. 6:04you had as we were all discussing before
184. 6:06was this idea of actually paying off a
185. 6:09foreign government government official
186. 6:10to highlight exactly what the SEC is
187. 6:13looking at in trying to advance its
188. 6:15investigation you know there's a
189. 6:17considerable initiative both in the
190. 6:19United States and internationally to to
191. 6:23bring a stop and mitigate this
192. 6:25perception of widespread corruption of
193. 6:28government officials and here you have a
194. 6:31case where the work of a government
195. 6:33official is being designed to frustrate
196. 6:35the work have yet another government so
197. 6:37I think it really highlights some of the
198. 6:39interesting issues
199. 6:40they were to come they're gonna come out
200. 6:42and come into play as this case goes
201. 6:44forward all right let me ask you about
202. 6:46some of the other players in all this we
203. 6:48do get an indication from the government
204. 6:50filings that mr. Davis who was the chief
205. 6:54financial officer Allen Stanford's
206. 6:56former college roommate that he is gonna
207. 6:59plead in this case that's the indication
208. 7:01absolutely he's been charged by criminal
209. 7:04information a criminal information
210. 7:06unlike an indictment is basically a
211. 7:09consent document it's a document that's
212. 7:11filed and is that's exactly what
213. 7:13happened in the Madoff case where he's
214. 7:16agreeing to plead guilty to that
215. 7:18document he's pleading guilty to commit
216. 7:20to conspiracy mail fraud wire fraud
217. 7:22obstruction of the SCC's investigation
218. 7:25so in essence what he's saying is the
219. 7:27exact same thing for what you're
220. 7:29charging Allen Stanford and that he's
221. 7:31gonna try to stand in court and defend
222. 7:33himself
223. 7:34I'm mr. Davis the CFO I'm pleading
224. 7:38guilty all right let me ask you about
225. 7:39the statement from at least from the
226. 7:41attorneys representing Allen Stanford
227. 7:43since at least February this year Allen
228. 7:45Stanford has been working with lawyers
229. 7:46to meet and challenge the false
230. 7:47accusation against Sims those
231. 7:49accusations being that the Stanford
232. 7:51companies were fraudulent constitutive
233. 7:52Ponzi scheme to the contrary the present
234. 7:54insolvency of the Stanford companies was
235. 7:56caused by the SEC heavy-handed actions
236. 7:58which have destroyed and continue
237. 8:00destroyed much the value of the Stanford
238. 8:01companies and consequently the interest
239. 8:03of investors again your take on the
240. 8:06defense at this point well exactly what
241. 8:07we were discussing earlier this morning
242. 8:09but the what I found very interesting
243. 8:10about that statement was focused on the
244. 8:12phrase Ponzi scheme it wasn't that he
245. 8:15did not commit a fraud or that there
246. 8:17wasn't a fraud here but it's
247. 8:18specifically describing the conduct as a
248. 8:21Ponzi scheme which is the language that
249. 8:23the government sort of seized on and
250. 8:26played on on the heels of the Bernard
251. 8:28Madoff case I'm not persuaded yet that
252. 8:31this is a Ponzi scheme it's certainly an
253. 8:34indictment that reflects a massive fraud
254. 8:38with several conspirators involved in
255. 8:42considerable premeditated premeditated
256. 8:44conduct to not only defraud investors
257. 8:46but also to obstruct an SEC
258. 8:49investigation acts that can clearly be
259. 8:52set up to establish
260. 8:54in dish of money-laundering but to say
261. 8:56it's a Ponzi scheme
262. 8:57there were underlying assets does that
263. 8:59does that make any difference Allen
264. 9:01Stanford as he face any less of a case
265. 9:03because of that there is no statute that
266. 9:05says you know that you know the there's
267. 9:07no difference in the ultimate sentence
268. 9:09if convicted if it's a Ponzi scheme or
269. 9:11it's not a Ponzi scheme a Ponzi scheme
270. 9:14is charged as mail fraud and wire fraud
271. 9:16no different than run-of-the-mill
272. 9:19securities fraud the fact is the charges
273. 9:22are the same whether it is or it isn't I
274. 9:23think that statement is really a
275. 9:25deflection it's not substance all right
276. 9:29Jacob Frenkel
277. 9:30appreciate it again some legal
278. 9:31perspective on the situation facing
279. 9:33allen Stanford charge today by the
280. 9:35Justice Department Matt hi Peter thanks
281. 9:37very much